Are you ready for the next recession? How to prepare for downturn now

People are apparently feeling so good about the current economy that Americans quit their jobs in May at the fastest rate since 2001.Buzz60

There are ways to recession-proof your finances — and these same steps make it easier to weather personal money difficulties, too.(Photo: Getty Images)

The idea of preparing for a recession probably sounds unpleasant at best and impossible at worst. After all, it’s hard to know when or why the next one will hit.

But there are ways to recession-proof your money – and these same steps make it easier to weather personal financial difficulties, too.

1. Bolster your savings

You’ve probably heard that you should have six months worth of living expenses in an emergency fund. This advice “is fairly standard in any type of economy,” says Chad Nehring, a certified financial planner at Conceptual Financial Advisors in Appleton, Wisconsin. If you’ve drawn yours down, now is a good time to prioritize contributions. And if you’re starting from scratch, set an initial goal of $500 to get you through minor emergencies. Here are other emergency fund tips.

You can also build your savings account without rejiggering your budget. How? Move the bulk of your balance to a high-yield account. Online banks, such as Ally or Capital One 360, often pay much higher rates on savings than national brick-and-mortar chains, such as Chase. There might not seem to be much difference between 0.01 percent and 1.50 percent APY, but it means $150 more a year on a $10,000 balance.

2. Get your investments in order

First things first: “Consider that you’re now almost 10 years older than (during) the last recession. Are you comfortable with the level of risk that you’re taking?” Nehring says. The closer you are to retirement, the more of your portfolio you’ll want in fixed-income investments, dividend-paying stocks or cash, he adds.

Set a meeting with a financial planner – NerdWallet recommends those that are fee-only. He or she can help you develop a comprehensive financial plan that addresses risk, taxes, spending and other areas. This can “help to plan how your investment portfolio should be positioned,” Nehring says. Having a plan “also helps keep some of the emotion out of both positive and negative market events.”

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3. Take aim at your debt

This is probably starting to sound familiar, but having a plan for your debt – and a date you’ll be free of it – is the first step to eliminating it, says Thomas Nitzsche, a credit educator at credit counseling agency Money Management International. “Take inventory, set a date, commit,” Nitzsche says. “Just be done with it.” He recommends meeting with a credit counselor if it will help keep you motivated. Any balances you can pay off now won’t be a factor during a recession, when you might have less money to pay toward them.

You can also gain financial flexibility by trading in your car – or even your home – for a cheaper one. Nitzsche did both after the last recession, when he was laid off from a job in financial services and began working at a nonprofit. The idea, he says, is living beneath your means, “really getting yourself to a point where you feel like you could do anything,” whether that’s taking a pay cut for a job you love now or facing a market downturn.

4. Harness your employability

No matter how much you like your job or how stable it seems, it’s smart to have your resume ready. California’s Employment Development Department recommends posting yours to LinkedIn and other job search sites, such as Job Central and Job Seeker. Make sure it’s up to date, and consider soliciting a few recommendations from co-workers and supervisors.

If you have the time or desire to go a step further, pursue additional training or certifications in your field or another that interests you. This might help you hang on to your job in the event of layoffs or land a new one if you do get cut.

It’s easier to get training, plump up your savings and investments and throw more money at debt when you’re not in crisis mode, so there’s no better time to get ready. No matter when the next recession (or personal crisis) hits, you’ll be grateful you did.